China Déjà Vu Pipeline Explosions and Oil Spill

By: Dian_L_Chu

Just when BP finally seems to have got a handle on the Macondo well with the successful containment cap, multiple explosions and oil spill are taking place--halfway around the globe--in China.  

Chinese CCTV reported that six explosions hit two oil pipelines in northeastern Dalian's Xingang Harbor (see map) on the evening of Friday July 16, while a 300,000 ton foreign oil tanker was being unloaded.

Over 2,000 fire fighters, along with 219 fire trucks were mobilized for the rescue mission.  The subsequent blaze had burned for 15 hours before finally being extinguished on Saturday morning.  So far, no casualties were reported.

The oil spill had contaminated about 19 square miles (50 square kilometers) off the coast of Liaoning province. A government official was quoted saying it was unclear how much oil had leaked from the pipelines. 

However, on July 17 evening, nearly 20 vessels started performing oil contamination removal process, according to Epoch Times .  Over-5-million-tons of foam and 20-tons of dry powder fire extinguishers were used, which China National Radio indicated could have some environmental impact. 

China National Petroleum Corp. (CNPC), the country's largest oil company, is the owner of both pipelines. China Daily reports that CNPC indicated on its website that the oil had stopped leaking after a valve was closed. It said the oil spill has been "fenced off and contained."    

The BP Gulf of Mexico disaster has elevated all oil related incidents to immediate top priority status by global governments. In China's case, this has aroused the attention of President Hu Jintao and Premier Wen Jiabao, with Vice Premier Zhang Dejiang rushing to the site Friday night to direct operations. 

Dalian is the only ice-free port in northeast China with important commercial and strategic interest throughout the history of China.  WSJ says the pipelines were links between ships and oil tanks on land.  CNPC has 20 storage tanks that can hold 1.85 million cubic meters of oil in a special tax zone at the port.  

So, the explosion and fire could have easily been another disaster had it not been contained and extinguished in a timely manner. Meanwhile, an official investigation team has been established, but the cause of the pipeline explosions is yet to be determined.

Nevertheless, judging from the strategic importance related to Dalian and the CNPC oil pipelines; one could not help but wonder about this curious oil spill déjà vu.

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

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